Hospital chain Community Health Systems said Monday that it’s putting itself up for sale after experiencing difficulty digesting its acquisition of another hospital chain.
Melanie Evans of The Wall Street Journal had the news:
The company said in a news release it had no timeline for its talks with advisers and “no certainty that the exploration will result in any kind of transaction.”
Shares of the Franklin, Tenn.-based company fell 1.6% in premarket trading after rising 16% at the end of last week on news of the possible sale. Community Health Systems shares have tumbled from a high of $64.04 in June 2015 to $12.29 at close on Friday as the company repeatedly failed to meet expectations in recent quarters.
Community Health Systems executives have said the turnaround of former HMA hospitals has been difficult. The company acquired HMA’s 71 hospitals in 2014, but has since pruned its portfolio with the spinoff of rural hospitals in Quorum Health Corp. and the announced divestiture of another dozen hospitals.
The Community Health Systems deal for HMA was perhaps the most troubled of the hospital megamergers of recent years. Tenet Healthcare Corp.acquired Vanguard Health Systems in 2013 and two nonprofit giants Trinity Health and Catholic Heath East merged the same year.
Holly Fletcher of The Tennessean noted Community Health’s heavy debt load and new strategy:
The Franklin-based company, which previously focused on its fleet of hospitals in rural communities, has turned its attention to key metropolitan areas, such as Knoxville, Birmingham, Ala., and Fort Wayne, Ind., that also serve small towns.
The company has been pruning its portfolio, including a spinoff of 38 hospitals into Quorum Health Corp. But it continues to feel financial pressure from the acquisition of HMA in January 2014 and a $14.9 billion net debt load.
It, along with its peers, are operating in a health care environment characterized by thestructural changes to who pays for bills and the promise of a move to a reimbursement system that puts value on efficiency and wellness rather than quantity of services.
CHS confirmed Monday via a news release and a statement from chairman and CEO Wayne T. Smith that the firm is working with advisers to talk with private equity firms about its options.
Carl O’Donnell and Greg Roumeliotis of Reuters report that Apollo Global Management is an interested buyer:
Apollo is seeking to add scale to its portfolio company RegionalCare Hospital Partners Inc with more hospitals, the people said. After acquiring it from buyout firm Warburg Pincus LLC last year, Apollo doubled RegionalCare Hospital Partners’ size in May with the acquisition of Capella Healthcare Inc.
Some real estate investment trusts have also shown an interest in the assets of Community Health Systems, some of the people said. There is no certainty that any transaction will occur with any party, the people cautioned.
The sources asked not to be identified because negotiations are confidential. Community Health Systems and Apollo declined to comment, while RegionalCare Hospital Partners did not immediately respond to a request for comment.
Based in Franklin, Tennessee, Community Health Systems owns, leases or operates 158 hospitals in 22 U.S. states totaling nearly 27,000 licensed beds.